Articles Posted in Wage and Hour Disputes

In May 2016, the U.S. Department of Labor (DOL) issued a new rule that reportedly would have extended overtime pay for millions of workers around the country. Twenty-one U.S. states, led by Nevada, filed suit against the DOL in September to challenge the rule, alleging that it violated provisions of the Fair Labor Standards Act (FLSA), the Administrative Procedures Act (APA), and the U.S. Constitution. State of Nevada et al. v. U.S. Dep’t of Labor et al., No. 4:16-cv-00731, complaint (E.D. Tex., Sep. 20, 2016). A federal judge granted an injunction against the rule in November, temporarily halting its implementation nationwide. An appeal is still pending in the Fifth Circuit as of late January, but a new administration has also moved into the White House. It is not at all clear whether the DOL will continue to pursue the appeal or even defend the rule in the remainder of the trial court proceedings.

The FLSA establishes a national minimum wage and requires employers to pay nonexempt workers overtime pay at a rate of one-and-a-half times their regular rate of pay. Certain employees are exempt from the FLSA’s overtime provisions, including workers in executive, administrative, and professional positions. The DOL refers to these as EAP exemptions or white-collar exemptions. See 29 U.S.C. § 213(a)(1), 29 C.F.R. Part 541. The exemptions apply to employees who work in these fields and earn income above a certain threshold.

The new rule would raise the threshold from the current $455 per week for a full-time employee to $913 per week, or from $23,660 to $47,476 per year. 81 Fed. Reg. 32391, 32393 (May 23, 2016). The DOL estimated that this would affect about 4.2 million people nationwide. The rule was scheduled to take effect on December 1, 2016, but a lawsuit and an injunction changed that.

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Our economic system depends on the competition of individuals and businesses in a free market, subject to reasonable regulations. When one or more “persons”—a legal term that includes individuals and various types of businesses—take actions that make their segment of the market less competitive, they may be in violation of federal or state antitrust laws. These statutes prohibit employment practices, such as “wage-fixing” agreements among competing companies, that unfairly harm employees’ interests. The U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) recently issued a guidance document, entitled “Antitrust Guidance for Human Resource Professionals,” addressing the enforcement of federal antitrust laws. In addition to civil penalties, the DOJ has the authority to pursue criminal charges for anticompetitive practices in some situations. The guidance document advises human resources (HR) professionals to enact policies aimed at avoiding civil and criminal liability for their employers.Congress passed the Sherman Antitrust Act, 15 U.S.C. §§ 1 through 11, in 1890 in order to combat the formation of monopolies that could take over control of entire markets or commodities, such as oil or steel. When a single company has control over a particular product or service within a market, consumers typically suffer because of factors like the lack of incentive to keep prices at a reasonable level. Employees can also suffer when there is no other employer who has need of their skills. Federal laws and many state laws allow state regulators to take steps to prevent actions, such as mergers of two or more formerly competing businesses, that could lead to a monopoly.

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For most workers in the U.S., paid sick leave is a benefit conferred by their employer, solely based on the employer’s determination that it is a worthwhile investment. If an employer were to stop offering paid sick leave to its employees, they would have no recourse other than finding another job. No federal law requires paid sick leave, and only a handful of states—not including New Jersey or New York—have enacted laws mandating a minimum amount of paid sick leave. The news is not all dire, though. Thirteen cities in New Jersey have enacted their own paid sick leave laws. Morristown, New Jersey is the latest town to do so, although the mayor has reportedly delayed its implementation until early 2017. Employees of certain government contractors will soon benefit from a new Department of Labor (DOL) Final Rule, which takes effect at the end of November 2016.

Allowing workers to stay home due to an illness, without losing several days’ pay, seems like a sensible policy, at least when looking at society at large. Employees who cannot afford to lose the income may go into work despite being sick. This can spread illnesses like the flu, ultimately causing even bigger problems. While the Family Medical Leave Act allows unpaid leave for certain purposes, federal law makes no provision for paid sick leave. Only five states have paid sick leave laws:  California, Connecticut, Massachusetts, Oregon, and Vermont. In a nationwide sense, it is generally up to individual employers to decide whether or not to offer it to their employees. On a solely individual level, an employer might not see the value of giving paid sick leave to its workers. Businesses may not like regulations, but sometimes they serve a very important purpose.

Morristown became the 13th New Jersey municipality to enact a paid sick leave law in September 2016. Ordinance O-35-2016 describes the numerous societal benefits of allowing employees to earn paid sick leave, including “reduc[ing] recovery time” and “reduc[ing] the likelihood of people spreading illness to other members of the workforce and to the public.” Employees earn one hour of paid sick leave for every 30 hours that they work, up to a maximum of 24 hours (three work days) in a calendar year for employers with fewer than 10 employees, and 40 hours (five days) for employers with 10 or more employees. Additional exceptions apply, depending on various circumstances.

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The Fair Labor Standards Act (FLSA), along with state laws like the New Jersey Wage and Hour Law (WHL), requires employers to pay overtime compensation to non-exempt employees after they have worked more than 40 hours in a week. 29 U.S.C. § 207(a), N.J. Rev. Stat. § 34:11-56a4. Overtime pay violations can deprive workers of substantial amounts of wages, but while these amounts are significant to these workers, they are often not enough to make individual legal actions worth the cost. State and federal laws allow people with relatively small claims to file a lawsuit as a class action on behalf of the massive number of similarly situated claimants, and the FLSA has a procedure for “collective actions.” A federal judge in New Jersey recently granted certification to a FLSA collective action, as well as several state-law class actions, in a suit for unpaid overtime. Rivet, et al. v. Office Depot, Inc., No. 2:12-cv-02992, opinion (D.N.J., Sep. 13, 2016).

In order to obtain certification as a class action under federal law, plaintiffs must establish four elements:  numerosity of class members, commonality of legal or factual questions, representativeness of the plaintiffs’ claims, and ability of the plaintiffs to “fairly and adequately” represent the class. Fed. R. Civ. P. 23(a). The FLSA does not establish as many specific elements for a collective action, simply stating that the claimants must be “similarly situated.” 29 U.S.C. § 216(b).

The Third Circuit Court of Appeals, whose jurisdiction includes New Jersey, has identified examples of facts and circumstances that can establish or refute that claimants are “similarly situated.” Claimants who work “in the same corporate department, division, and location,” who “advance similar claims” and “seek substantially the same form of relief,” and who “have similar salaries and circumstances of employment” could be considered “similarly situated” for the purposes of an FLSA collective action. Rivet, op. at 4, quoting Zavala v. Wal-Mart Stores, Inc., 691 F.3d 527, 536-37 (3d Cir. 2011).

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Employers that are subject to the federal Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., are obligated to pay their non-exempt employees minimum wage and overtime. The FLSA allows plaintiffs alleging wage and hour violations to file a lawsuit on behalf of all similarly situated employees and former employees, known as a “collective action.” This is similar to a class action under Rule 23 of the Federal Rules of Civil Procedure, but it differs in several important ways. A federal court granted conditional certification last year to a collective action filed against a national restaurant chain. Turner v. Chipotle Mexican Grill, Inc., No. 1:14-cv-02612, mem. order (D. Col., Aug. 21, 2015). By the end of the summer of 2016, more than 10,000 of the defendant’s employees had reportedly joined the lawsuit.

The FLSA requires employers to pay minimum wage, which is currently $7.25 per hour at the federal level. Many states, including New Jersey, have a higher minimum wage, but $7.25 per hour is the amount that workers can enforce under this particular statute. Overtime work, basically defined as work performed over 40 hours in a calendar week, is entitled to 1.5 times the employee’s usual rate of pay. For a worker earning minimum wage, this would be $10.88 per hour. A common FLSA wage and hour violation involves requiring employees to perform duties at times when they are not “on the clock.” This might include time spent changing into and out of uniforms or work clothes and performing other tasks before or after the employer requires employees to clock in or out.

Individual wage and hour claims might not seem particularly significant at first glance, in the sense that an employee might be losing a fraction of an hour’s worth of pay for one shift. These sorts of practices often recur on a daily basis, however, over long periods of time, and the numbers can add up very quickly and become a very significant amount for an individual worker. It still might not be enough to make an individual legal claim worth the cost of both time and money. This is where FLSA collective actions help workers in this sort of situation.

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The traditional model of “employment” in the U.S., in which individuals work for an employer long enough to establish a career and secure retirement benefits, is a reality for fewer and fewer people. In many workplaces today, employees must fight simply to secure their status as employees—who are entitled to protection under various federal, state, and local employment laws—while their employers try to classify them as independent contractors. The “gig economy” is a relatively new concept of the last decade or so, in which people work as freelancers—i.e., independent contractors—for multiple clients. Unlike misclassified employees, freelancers accept that they are independent contractors, but they often lack the means to assert their contractual rights against much larger clients. These disputes can closely resemble wage and hour disputes between employees and employers. A bill pending in the New York City Council, informally known as the Freelance Isn’t Free Act, would protect the rights of freelancers to timely payment in full.

Currently, no law in New Jersey or New York specifically addresses the circumstances faced by freelancers. Laws regarding employee misclassification offer a good starting point for understanding these issues. Employers may see an incentive in classifying workers as independent contractors. Employees are generally protected by a wide variety of laws dealing with minimum wage, overtime compensation, workplace discrimination and harassment, family and medical leave, unemployment benefits, and other matters. Independent contractors’ rights are mostly limited to whatever is addressed in their contract—assuming they have a written contract.

New Jersey has adopted a standard for employee classification that is favorable to the employee. The New Jersey Supreme Court applied a test known as the “ABC test,” based on a provision of the New Jersey Unemployment Compensation Law. An individual is an independent contractor, rather than an employee, if they are “free from control or direction” by the employer with regard to their job duties, their work is “outside the usual course of the business” or “performed outside of all the [employer’s] places of business,” and they regularly work “in an independently established trade, occupation, profession or business.” N.J. Rev. Stat. §§ 43:21-19(i)(6)(A) – (C); Hargrove v. Sleepy’s, LLC, 106 A.3d 449, 453 (N.J. 2015).

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In late August 2016, the Governor of New Jersey vetoed a minimum wage bill passed by the state legislature in June. The bill, A15/S15, would have increased the minimum wage in this state to $10.10 per hour at the beginning of next year, with additional annual increases for at least three years. Failing to keep pace with the rising cost of living is a major criticism of minimum wage laws around the country. Many workers in New Jersey and throughout the country must already go to court to assert their rights against employers who do not pay them the minimum amount required by law. The governor cited the alleged impact of a minimum wage increase on New Jersey businesses, claiming that it would result in fewer jobs. The status quo, however, still leaves people unable to meet basic needs with a paycheck from a full-time job.

State minimum wage regulations set the minimum wage at the greatest of three amounts:

(1) the amount set by state law, which was most recently set at $7.15 per hour as of October 1, 2006, N.J. Rev. Stat. § 34:11-56a4;
(2) the amount set by the federal Fair Labor Standards Act (FLSA), which has been $7.25 per hour since July 24, 2010, 29 U.S.C. § 206(a)(1)(C); or
(3) $8.38 per hour, N.J.A.C. § 12:56-3.1.

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The Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., guarantees overtime pay for employees of covered employers for work performed in excess of 40 hours in a week, provided that they do not fall under one of the law’s exemptions. Regulations promulgated by the U.S. Department of Labor (DOL) set a minimum salary level, above which some employees are exempt from the overtime rule. The DOL issued a new regulation in May 2016 raising this level, giving more than four million workers nationwide access to overtime pay. 81 Fed. Reg. 32391 (May 23, 2016). The new rule will go into effect on December 1, 2016.

Workers are entitled to one and a half times their regular pay under the FLSA if they work over 40 hours in a week. 29 U.S.C. § 207(a). Employees who work “in a bona fide executive, administrative, or professional capacity,” however, are exempt from the FLSA’s overtime rules. Id. at § 213(a)(1). This applies to a wide range of workers, and the DOL’s regulations go into great detail about how the overtime exemption applies to executive, administrative, professional, computer, and outside sales employees. See 29 C.F.R. § 541.0 et seq.

Current DOL regulations only exempt executive, administrative, and professional employees from the overtime rules if their salary is at least $455 per week, also calculated as $910 biweekly, $985.83 semimonthly, or $1,971.66 per month. 29 C.F.R. § 541.600. Annually, this equals a salary of just under $23,660. The DOL set these levels in 2004, and that was reportedly its first revision of the salary levels since 1975. 69 Fed. Reg. 22122 (Apr. 23, 2004). The new rule is partly a response to concerns that the cost of living has exceeded the 2004 level.

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Several bills currently pending in the New Jersey Legislature could make substantial changes to state laws dealing with employees’ rights in the workplace. Two bills address various forms of employment discrimination, and another two would raise the state’s minimum wage. Each bill was introduced in early 2016 and referred to a committee. Three bills are still awaiting committee hearings, while one of the minimum wage bills passed both chambers and is now waiting for the governor’s signature or veto. Whether any of these bills pass or not, they bring needed attention to issues that employees face throughout New Jersey.

Minimum Wage

The minimum wage in New Jersey is currently $8.38 per hour. N.J. Rev. Stat. § 34:11-56a4, N.J.A.C. § 12:56-3.1. A bill that would gradually raise the state’s minimum wage to $15 per hour has passed both houses of the Legislature. A15 would raise the minimum wage to $10.10 per hour on January 1, 2017. On the first day of each subsequent year, the minimum wage would increase by the greater of either $1.25 per hour or $1.00 plus that year’s increase in the consumer price index.

The goal of the bill is for the minimum wage to reach or exceed $15 per hour by 2021. The bill was introduced in the New Jersey Assembly on February 8, 2016. The Assembly passed it on May 26, followed by the Senate on June 23. The governor has reportedly threatened to veto the bill but has not yet done so. He also has not signed it into law.

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The Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., requires payment of a minimum wage. Violations of this provision can take many forms, including deductions from a person’s compensation that result in a total net pay below the minimum wage for the amount of work performed. Compensation is also not limited to wages, as demonstrated in a decision from late 2015 from the New York Court of Appeals. The court ruled that an individual who worked for the city in exchange for public benefits was an “employee” within the meaning of FLSA, allowing his claims for minimum wage violations to go forward. Matter of Carver v. State of New York, 26 N.Y.3d 272 (2015). The incident that gave rise to the lawsuit involved the seizure of the plaintiff’s lottery winnings by the state under a law allowing reimbursement for benefits paid out in the previous decade. The plaintiff alleged that this reduced his overall compensation to below minimum wage.

In order to prevail in a claim under FLSA, a plaintiff must establish that they have standing as an employee. FLSA’s definition of “employee” is simply “any individual employed by an employer.” 29 U.S.C. § 203(e)(1). The law defines “employer” to include public agencies. Not all employees, however, are entitled to protection under FLSA and other federal employment laws. Exemptions identified by FLSA include individuals “employed in a bona fide executive, administrative, or professional capacity”; certain types of agricultural and food industry workers; and various other jobs. Id. at § 213(a).

The plaintiff in Carver worked almost full-time for the City of New York for about seven years, in exchange for public assistance under a state program. Benefits included cash payments of $176 every two weeks and food stamps. About seven years after he left the work program, he won $10,000 in the lottery. He filed suit against the State of New York when it seized 50 percent of the winnings.

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